A mood changer and perhaps a game changer. A new mood has greeted the New Year as the market deals with some optimism that the economy can actually recover. Could it be all that money on the sidelines is looking for a place to go? Or maybe it is because we are more pessimistic that the world can ever get along and that geo-politics may still matter when it comes to a barrel of oil. Oil, that had been in a decidedly bearish mood, appears to have gained some loft out of its pessimism as we now fear that the oil world we have come to know may now be coming to an end.

It seems that the Russian-Ukraine dispute over natural gas lifted the energy complex out of its bearish mood on a lightly traded New Years Eve. Oil was in the thirties and turned around big time on news that Russia was cutting off gas supply to the Ukraine. Yet is this news really that bullish for oil? No, not really. In fact Bloomberg News is reporting that Russia and the Ukraine are preparing to resume talks in their dispute over natural gas prices and that Ukrainian President Viktor Yushchenko said in a statement yesterday the two sides are near a compromise. But what it shows is the market is looking for an excuse to turn around. Oil has rallied in the past on these supply cut offs and decided it should perhaps do so again.

Yet it is not just the Russia/Ukraine dispute that has gathered the attention of the oil market. Oil seems to be rallying this morning on the ongoing conflict in the Gaza strip. Iran has called on oil producers to cut off oil supply as a protest. Reuters News reported that an Iranian military commander called on Islamic countries to cut oil exports to Israel's supporters in response to the Jewish state's offensive in Gaza quoting the official IRNA news agency. IRNA said Commander Bagherzadeh described oil as a commodity that could put pressure on Israel's European and American backers in the unequal war faced by Palestinians in the coastal strip. Pointing at Westerners' dependence on the Islamic countries' oil and energy resources, he (Bagherzadeh) called for cutting the export of crude oil to the Zionist regime's supporters the world over, IRNA said, referring to Israel. Iran does not recognize Israel and is a backer of Hamas. In fact some say that Iran control Hamas. Other oil producers in the Gulf have ignored Iran's call for Islamic countries to cut supplies to supporters of Israel in response to the Israeli offensive in Gaza.

But the bigger concern to the market is what OPEC might do. Does OPEC matter again? Dow Jones reports that Iran's OPEC representative Mohammad Ali Khatibi said OPEC will hold an extraordinary meeting in Kuwait in February. The extraordinary meeting of the Organization of Petroleum Exporting Countries is due to be held next month in Kuwait, Khatibi was quoted as saying. The exact date has not been fixed yet and no invitation has been sent to the members either, he added. Last month, OPEC agreed to cut output by 2.2 million barrels a day but prices continued to fall. Iran, the OPEC's number two producer, which was supportive of a serious supply cut at the previous meeting, hadn't decided on any move yet. We will precisely study the market and give our proposal based on it, Khatibi said.

Dow Jones also reported that OPEC will cut daily shipments of crude oil by 1 percent in the four weeks to Jan. 17 as the group enacts supply reductions announced in the past four months, according to industry consultant Oil Movements. The Organization of Petroleum Exporting Countries, producer of more than 40 percent of the world's oil, will load 23.75 million barrels a day in the four-week period, down from 24 million in the four weeks to Dec. 20, Oil Movements said.

Last month OPEC announced a record supply cut of 14 percent after curbs agreed on in September and October failed to stop prices falling among a worldwide decrease in demand. The group has implemented about half of the cuts it pledged in September and October. Oil Movements also said that oil shipments from the Middle East will decline 1.2 percent to 16.96 million barrels a day in the period to Jan. 17. A total of 419.34 million barrels of crude will be on board tankers on Jan. 17, a decline of 8.9 percent from the month before, when 460.14 million barrels were being shipped. Oil Movements combines reports from shipbrokers on tanker rentals with its own mathematical models to calculate how much crude is being shipped. OPEC has completed about 1.2 million barrels a day of the 2.0 million barrel a day in supply cuts announced in September and October according to Oil Movements as quoted by Dow Jones.

With all the emotion and dramatic moves the long term chart for oil is still bearish. Oil needs to get above $50.00 to change the long term trend. If the stock market rally fails to hold, then oil could fall just as hard. Long term traders should try to sell into this rally. Bottom pickers should wait for a pullback to get long. With the type of dramatic moves we're having in the oil market, it's possible to be long or short and a winner or loser in very short order. Entry is the key!